Renegotiating Existing Agreements: How to Deal with “Life Struggling Against Form”

Abstract

Renegotiation of existing agreements is constant in all areas of life. In this article, the author examines the nature and causes of renegotiation and offers guidance to persons involved in the renegotiation process. He identifies three distinct types of renegotiations – post‐deal, intra‐deal, and extra‐deal renegotiation. Each of the three types poses particular problems and opportunities and each requires different techniques to deal with those problems and opportunities.

The antecedents of renegotiations in practice—an exploratory analysis

“…Further rules might be compatible with different goals; diminishing renegotiation likelihood is just one goal among others. Salacuse (1998Salacuse ( , 2001 identifies culture as a predictor for renegotiations-Asian cultures seem to have different norms regarding the appropriateness of readdressing negotiated agreements. The generalisability of the model can, therefore, only be claimed for Western cultures and needs to be evaluated in further studies.…”

“…First, the contingencies cannot be completely anticipated (bounded rationality) and second, the attempt is inefficient due to the costs of contracting. A certain degree of flexibility and ambiguity in business contracts is, therefore, desired in order to compensate changes in the environment, but both will inevitably lead to renegotiations (Salacuse 2001). The bounded rationality of the negotiators limits their ability to achieve a contract that is coherent and precise enough to actually fulfil what is agreed upon and to react to changes in the environment.…”

“…As Salacuse (2001) points out, these types of negotiations often aim at allocating losses based on 'shattered expectations' or all kinds of problems. For these forms of unwanted renegotiations two main reasons are proposed by Salacuse: (1) incomplete or unclear contracts (Hart and Moore 1988) and (2) changes in the environment that were not anticipated in the contract.…”

“…Here renegotiations are regularly assumed to be of a strategic nature. Salacuse (2001) clarifies the term by distinguishing three distinct forms of renegotiations, namely post-deal renegotiations, intra-deal renegotiations, and extra-deal renegotiations. All three forms have in common that they describe a subsequent negotiation which is related to a prior negotiation between the very same parties.…”

“…Thus economic ideas such as investments and pay-offs are stretching the metaphor to its limits, but renegotiations regularly carry a threat of breaking up a business relationship. Salacuse (2001) argues that a rational actor will enter into renegotiations only after assessing the expected net benefits from renegotiations, including the potential losses in relationship value. Ariñ o and de la Torre (1998) make a similar point.…”